Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) has long been synonymous with identifying top dividend-paying stocks and turning them into powerful, long-term cash generators.
As elevated interest rates and market volatility continue to cloud the economic outlook, Warren Buffett’s time-tested strategy of investing in cash-generating dividend stocks is once again proving its worth.
Buffett’s long-term bet on Coca-Cola
One standout in his portfolio is beverage giant Coca-Cola Co. (NYSE: KO), a position Buffett has held since the late 1980s. The Oracle of Omaha began accumulating Coca-Cola shares in the aftermath of the 1987 stock market crash, betting on the brand’s ability to weather economic downturns.
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Fast-forward to today, Berkshire Hathaway holds 400 million shares of Coca-Cola, valued at approximately $27.7 billion, accounting for 11.2% of Buffett’s total stock portfolio.
This long-held stake is set to deliver a remarkable $816 million in dividend income in 2025 alone, thanks to Coca-Cola’s quarterly dividend of $0.51 per share. That translates to nearly $204 million every quarter flowing into Berkshire.
Coca-Cola is a Dividend King, having increased its annual payout for 63 consecutive years. Its current dividend yield stands at around 2.9%, more than double the average yield of the S&P 500.
Currently trading at $70.12, Coca-Cola shares have climbed 1.5% over the past month and are up over 12% year-to-date.
For Buffett, Coca-Cola’s dividend stream has become a model of long-term wealth creation. Berkshire’s initial investment of $1.3 billion between 1988 and 1994 has paid off handsomely. Today, the annual dividend payments alone far surpass that original outlay every two years.
KO stock outlook: Growth amid challenges
Coca-Cola’s recent financial results suggest its defensive appeal remains intact. On February 11, Coca-Cola released its Q4 and full-year 2024 results, reporting revenue of $11.54 billion, comfortably beating analyst estimates of $10.68 billion, alongside adjusted earnings per share of $0.55 beating forecasts.
Notably, unit case volume grew by 2% during the quarter, marking a reversal from earlier declines, fueled by strong demand across key markets such as the U.S., China, and Brazil.
Organic revenue also surged 14% year-over-year, with price increases and favorable product mix playing key roles.
Looking forward, Coca-Cola expects 5% to 6% organic revenue growth in 2025, alongside a 2% to 3% increase in earnings per share, despite facing certain headwinds.
Rising costs, particularly due to President Trump’s recently announced 25% tariff on aluminum imports, could increase input expenses. However, CEO James Quincey pointed to the company’s ability to manage cost pressures by shifting toward more affordable packaging options like PET bottles.
Quincey also highlighted the company’s ‘all-weather strategy,’ emphasizing Coca-Cola’s agility in navigating global macroeconomic challenges while continuing to expand market share across key segments, including sparkling soft drinks, value-added dairy, and tea.
Wall Street analysts remain bullish, with 19 analysts giving the stock a consensus ‘Strong Buy’ rating. The average 12-month price target sits at $75.56, suggesting nearly 8% upside potential from current levels, while the highest forecast is set at $85.
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